ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1), RAJKOT, RAJKOT V. KRUTI RAJESH DOSHI, RAJKOT

ITA 302/RJT/2024

AI Insights

The case revolves around the tax implications following the amalgamation of M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd with M/s Rajoo Engineers Ltd. Kruti Rajesh Doshi, a shareholder in the amalgamating companies, received shares in the amalgamated company. The Assessing Officer initially added the value of these shares as undisclosed income under Section 56(2)(vii)(c)(ii) of the Income Tax Act, 1961, claiming they were issued at excess consideration. However, the CIT(A) reversed this decision, noting that the shares were issued under a legally approved scheme of amalgamation and thus did not constitute a transfer. The Tribunal upheld the CIT(A)'s decision, emphasizing that the transaction did not meet the criteria of a 'transfer' under the relevant sections of the Act.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 27270 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-10-2024
• Assessment Year: 2014-2015
• Appeal Filed On: 09-05-2024
• Other Referred Cases: CIT vs. Leena Sarabhal, PCIT vs. Jigar Jashwantlal Shah, DCIT Circle-3(1)(2), Ahmedabad vs. Mis. Ozone India Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIMANYU SINGH YADAV
• Assessee Lawyers: R.B. SHAH
• Keywords: Capital asset; Retrospective amendment; Fair market value; Gift; Reopening of assessment; Scheme of amalgamation
• Section: 148; 143(3); 143(2); 56; 56(2); 13

Judgement Text

" Page | 1 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.302/RJT/2024 (\u000bनधा\u000fरण वष\u000f / Assessment Year: (2014-15) (Hybrid Hearing) Assistant Commissioner of Income Tax, Circle-2(1), Rajkot, Room No.311, 3rd Floor, Aaykar Bhawan, Race Course Ring Road, Rajkot- 360 001 Vs. Kruti Rajesh Doshi Shrutina, 10-C, Panchvati Society, Kalawad Road, Rajkot-360 003 \u0013थायीलेखासं./जीआइआरसं./PAN/GIR No.: AKLPD9653K (अपीलाथ\u0019/Appellant) (\u001a\u001bयथ\u0019 /Respondent) \u000bनधा\u000f\u001cरती क\u001f ओर से/Assessee by :Shri R. B. Shah, A.R. राज\u0013वक\u001f ओर से /Revenue by :Shri Abhimanyu Singh Yadav, Sr.DR सुनवाई क\u001f तार#ख/Date of Hearing : 07/10/2024 घोषणा क\u001f तार#ख /Date of Pronouncement: 18/10/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (A.Y.) 2014-15, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘NFAC/Ld. CIT(A)’], dated 21.03.2024, which in turn arises out of an assessment order passed by the Assessing Officer (in short ‘AO’) u/s 143(3) r.w.s. 147 of the Act, dated 01.12.2019. 2. The grounds of appeal raised by the Revenue are as follows: Page | 2 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi “(1) The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,97,92,355/- made by the assessing officer u/s 56(2)(vii)(c)(ii) of the Act on account of excess consideration for her shares held in M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, on amalgamation in M/s Rajoo Engineers Ltd. (2) On the facts of the case, the Ld. CIT(Appeals), NFAC, Delhi ought to have upheld the order of the Assessing Officer. (3) That the revenue craves leave to add, amend, alter or withdraw any grounds of appeal.” 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee, before us, is an individual, and filed her return of income for assessment year(A.Y.) 2014-15, on 31/07/2014, declaring total income of Rs.88,785/- In the assessee`s case, no scrutiny assessment was made on the basis of the return of income filed by the assessee.Subsequently, the case was re-opened, following the information received from the DCIT, Junagadh Circle, Junagadh to the effect that during the Financial Year(F.Y.) 2013-14, relevant to the assessment year under consideration, the assessee was one of the share holders of M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt. Ltd, which were merged with M/s Rajoo Engineers Ltd on amalgamation. As per the information, the assessee was holding 12,950(3.24%) and 45,500(30.33%) shares of M/s Hitesh Engineers Pvt. Ltd, and M/s Shruti Engineers Pvt. Ltd, respectively.These two entities, on amalgamation, with M/s Rajoo Engineers Ltd, received a total of 1,51,30,258 shares in excess to fair market value ( in brief ‘FMV’) of shares of the public company i.e., M/s Rajoo Engineers Ltd and accordingly, total value of shares issued in excess of the fair consideration, as per fair market value(FMV) of the shares of the Public Company i.e, M/s Rajoo Engineers Ltd, was Page | 3 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi Rs.16,11,37,250/-. Thus, the assessee in proportion to her holding in M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt. Ltd, has received an excess consideration aggregating to Rs. 1,97,92,355/- (Rs. 34,78,075/- + Rs. 1,63,14,280/-) respectively, on account of the allotment of shares of M/s Rajoo Engineers Ltd, in lieu of the shares of the M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, on the said amalgamation of the M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, with M/s Rajoo Engineers Ltd. 4. Therefore, the assessing officer, issued notice u/s 148 of the Act, dated 27.03.2019, and served to the assessee. In response to the notice u/s 148 of the Act, the assessee filed her return of income for the assessment year (A.Y.) 2014-15 on 24/04/2019, showing a total income of Rs. 1,08,350/-. Thereafter, statutory notice u/s 143(2) of the Act, dated 22.10.2019, was issued and duly served to the assessee. The copy of reasons recorded for reopening of assessment was provided to the assessee. The assessee, vide letter dated 07/06/2019 raised objections against reopening of the assessment. The objection so raised were not found to be tenable and same were disposed of by passing a speaking order, dated 28/09/2019. In order to obtain details from the assessee, notice u/s 142(1), dated 30/09/2019, was issued. During the course of assessment proceeding assessee has filed her submission through ITBA module through her authorized representative. 5. The assessing officer, observed that while finalizing assessment for the assessment year (A.Y.) 2014-15, in the case of M/s Rajoo Engineers Ltd, Junagadh,( transferee- company), the assessing officer made an addition of Rs. 18,74,73,500/-, on account of issuance of shares to related Page | 4 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi person at a discount. For the sake of clarity, the relevant excerpts of the said order of the assessing officerwas reproduced in the assessment order of the assessee, vide para No.4 of the assessing officer. Therefore, the assessing officer added the amount of Rs. 18,74,73,500/- as excess value, transferred to beneficiary, related parties, on protective basis, in the assessment order of M/s.Rajoo Engineers Ltd. for A.Y.2014-15. 6. This information regarding beneficiaries of excess consideration given by M/s Rajoo Engineers Ltd, was passed on, to the assessing officer, in the case of Smt.Kruti Rajeshbhai Doshi, who was holding shares of M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, in proportion of 3.24% and 30.33%, respectively, on the day of amalgamation, of M/s Hitesh Engineers Pvt Ltd, and M/s Shruti Engineers Pvt Ltd, with M/s Rajoo Engineers Ltd. After due verification of the assessce's return of income, filed for A.Y.2014-15, the case of the assessee was reopened by recording reasons and obtaining the approval of Joint, CIT Range-2(1), Rajkot. In view of above position, vide letter dated 19/11/2019, final show cause notice was issued to the assessee. The Assessee was asked, as to why the undisclosed income of Rs. 1,97,92,355/- should not be added back to the total income of the assessee. 7. In response to the final show cause, the assessee replied to the assessing officer, stating that provisions of Section 56(2)(vii)(c) (ii) of the Act, do not override the provisions of Section 47(vii) of the Act. In order to compute capital gain, there should be “transfer”, since, the said transaction, under consideration is not a “transfer”, therefore, capital gain does not attract. The assessee stated that any shares received by individual or HUF, as a consequence of demerger or amalgamation of a company, Page | 5 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi shall not attract the provisions of clause (vii) of sub -section (2) of section 56. This amendment is made effective from 1st April, 2017 and shall accordingly apply in relation to A.Y.2017-18 and subsequent years.Accordingly clause (h) is introduced after clause (g), under second proviso under sub- clause(c) of clause (vii), under sub- section (2) of section 56 of the I.T.Act, 1961.The said amendment is clarificatory in nature and hence, equally applicable to the transactions in financial year 2013-14, relevant to A.Y.2014-15. However, the assessing officer rejected the contention of the assessee and made the addition in the hands of the assessee, as undisclosed income of Rs. 1,97,92,355/-. 8. Aggrieved by the order of the assessing officer, the assessee carried the matter before the Ld. CIT(A), who has deleted the addition made by the assessing officer. The ld. CIT(A) observed that there is no inadequate consideration, which is less than fair market value of property (shares), Section 56(2)(c)(vii) (ii) does not come into play at all. It was noticed by learned CIT(A) that the shares were allotted under a statutorily approved scheme of amalgamation under the governing regulatory statute, namely the Companies Act, 1956, after hearing all stakeholders including the government and the contents of the scheme, having become final, the appellant filed the same with authorities, including SEBI and Bombay Stock Exchange. It is to note that the allotment of shares by a company does not give rise to a transfer of shares and provisions of Section 50(2) has no applicability there being no transfer of a property in law. Further, learned CIT(A) relied on the judgement of the Hon'ble High Court of Gujarat in the case of CIT vs. Leena Sarabhal, wherein it was held that in the scheme of amalgamation, shares are issued in lieu of shareholding in the amalgamating company and therefore, there is no tax implication. The Page | 6 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi ld. CIT(A) also relied on the judgement of Hon'ble High Court of Gujarat in the case of PCIT vs. Jigar Jashwantlal Shah [203] 154 taxmann.com 568 (Gujarat), where init was held as follows: \"18. In view of the above, the provisions of sec.56(2) would not be applicable to the issue of new shares which is also submitted by the explanatory notice to the Finance Bill, 2010, wherein, it is clarified that sec.56(2) (vii)(c) of the Act ought to be applied only in the case of transfer of shares. It is trite law that allotment of now shares cannot be regarded as transfer of shares. Therefore, in order to apply the provisions of sec.56(2)(vii) (c), there must be an existence of property before receiving it. As per advanced Law Lexicon Dictionary, the term \"receive\" has been defined as \" To receive means to get by a transfer, as to receive a gift, to receive a letter or to receive money and involves an actual receipt.\" Issue of new shares by company as a right shares is creation of property and merely receiving such shares cannot be considered as a transfer under sec.56(2(vii)(c) and accordingly, such provision would not be applicable on the issuance of shared by the Company in the hands of the allottee.\" The ld CIT(A) also relied on the decision of Hon'ble ITAT, A Bench, Ahmedabad in the case of DCIT Circle-3(1)(2), Ahmedabad vs. Mis. Ozone India Ltd in ITA No.2081/Ahd/2018 dated 13.04.2021. Therefore, the ld CIT(A) held that the issue of shares at 'face value' by the amalgamated company (assessee) to the shareholders of amalgamating company in pursuance of scheme of amalgamation, legally recognized in the Court of Law, neither falls within the scope and ambit of clause (viib) to Section 56(2), of the Act, when tested on the touchstone of objects and purpose of such insertion, that is, to deem unjustified premiums charged on issue of shares, as taxable income, nor does it fall in its sweep when such deeming clause is subjected to interpretative process having regard to the scheme of the Act. Therefore, the addition made by the assessing officer was deleted by ld CIT(A). 9. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. Page | 7 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi 10. Before us, Ld. Sr-DR for the Revenue submitted that scheme of Section 56, “income from other sources” is different from the scheme of “capital gain”. Therefore, “income from other sources” scheme is governed by Section 56 of the Act and the head of “income from other sources” should not be compared with the head of “capital gain”. Therefore, reliance of the assessee on clause-(vii) of Section 47 of the Act is misconceived and, therefore, should not be relied on. The Ld. Dr-DR pointed out that since Section 56 and Section 47 of the Act are altogether is different, therefore, judgments referred by the Ld. Counsel for the assessee will not apply in assessee’s case. The Ld. Sr-DR also submitted that the judgments relied upon by the Ld. Counsel for the assessee will not apply, as the assessee’s shares are listed shares and the judgments referred by the Ld. Counsel for the assessee is in relation to unlisted shares. Besides, some of the judgments referred by the Ld. Counsel relate to right issue of shares whereas assessee has the normal shares and the concerned company issues right shares subsequently.Therefore, judgments relied by the Ld. Counsel for the assessee are not applicable to the facts of the assessee’s case under consideration and hence, the order of the assessing officer should be upheld. 11. On the other hand, Ld. Counsel for the assessee argued that the assessee company has issued the shares in the scheme of amalgamation and the amalgamated company issued the shares to the shareholdings amalgamating company in pursuance to the amalgamation scheme. However, the assessing officer made the addition u/s.56(2)(vii)(c)(ii) of the Act without considering the fact that this is not a transfer as per the definition given in Section 47(vii) of the Act because the amalgamated Page | 8 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi company had issued the shares to the share holders of the amalgamating company, that is, the transferee company in case of the amalgamation issued shares to the share holders of the transferor company and such transaction is not regarded as transfer u/s.47(vii) of the Act. Hence, there is no question of taxing the transaction in the hands of the individual assessee, where the assessee received the shares in the scheme of amalgamation. Since, the transaction is not regarded as a transfer, hence, the question of capital gain does not arise as it is settled law that in order to compute capital gain, there must be transfer. Therefore, such transaction should not be taxable u/s.56(2)(vii)(c)(ii) of the Act. Ld. Counsel for the assessee also took us through clause (x) of Section 56(2) of the Act and pointed out that sub-clause (ix) of clause (x) of sub-section (2) of Section 56 also states that such transaction cannot be regarded as a transfer and, therefore, it cannot be taxable u/s.56 of the Act. The Ld. Counsel for the assessee took us through various provisions of the statute as referred above and in support of his arguments, Ld. Counsel for the assessee relied upon the following judgments: i. PCIT vs. Jigar Jashwantlal Shah, Tax Appeal Nos. 89 & 96 of 2023 ii. CIT vs. Leena Sarabhai (N.Ch), dated 1st March, 1994, [1996] 221 IT 520 (Guj) iii. DCIT vs. M/s. Ozone India Ltd. in ITA No.2081/Ahd/2018 with CO No.103/Ahd/2019, order dated 13.04.2021. The Ld. Counsel relied on the order passed by Ld.CIT(A). 12. We have heard both the parties and perused the materials available on recordWe find that Para No. 8.1 of the scheme of amalgamation, duly Page | 9 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi approved by the Hon`ble High Court of Gujarat, the consideration/Exchange of Shares is stated as follows: “(i) The Transferee Company will issue in the proportion of 304 equity shares of face value of Re.1/- each of the Transferee Company, credited as fully paid-up for every 10 fully paid equity shares of the face value of Rs. 10/- each held by the Equity Shareholders of the Transferor Company No. 1, on such date, as the Board of Directors of the Transferee Company may decide. (ii) The Transferee Company will issue in the proportion of 411 equity shares of face value of Re.1/- each of the Transferee Company, credited as fully paid-up for every 10 fully paid equity shares of the face value of Rs. 10/- each held by the Equity Shareholders of the Transferor Company No. 2 on such date as the Board of Directors of the Transferee Company may decide.\" The ld Counsel stated that assessee received shares on amalgamation of Hitesh Engineers Pvt Ltd and Shruti Engineers Pvt. Ltd. (Amalgamating Companies) into Rajoo Engineers Ltd. (Amalgamated Company) on the basis of swap ratio as per scheme of amalgamation approved by the High Court of Gujarat. The copy of scheme of Amalgamation as approved by High Court of Gujarat is submitted by the assessee before the Bench. Therefore, 10 Equity Shares each having paid-up value Rs. 10 per share of Transferor Company No. 1 (Hitesh Engineers Pvt. Ltd.) is exchanged for 304 Equity Shares each having paid-up value Re.1 per share of Transferee Company (Rajoo Engineers Ltd.) on amalgamation. Similarly, 10 Equity Shares each having paid-up value Rs. 10 per share of Transferor Company No. 2 (Shruti Engineers Pvt. Ltd.) is exchanged for 411 Equity Shares each having paid-up value Re.1 per share of Transferee Company (Rajoo Engineers Ltd.) on amalgamation. However, the Assessing Officer has valued the share of Transferor Company No.1 (Hitesh Engineers Pvt. Ltd.) at Rs. 55.39 and Transferor Company No.2 (Shruti Engineers Pvt. Ltd) at Rs. 74.86 and the value of the share of Transferee Company (Rajoo Engineers Ltd.) at Rs. 10.65 having paid-up value Rs.1/- per share. Page | 10 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi 13. As per ld Counsel, the shares of Transferee Company are not issued at discount as explained in the following tabular presentation, before the assessing officer: Sr. No. Particulars Rajoo engineers Ltd. Hitesh Engineers Pvt. Ltd. Shruti Engineers Pvt. Ltd. 1 Paid-up value per share 1 10 10 2 FMV per share (As per Scheme of Amalgamation) 1.82 55.39 74.86 3 FMV of share at Rs.10 Paid-up value 18.20 55.39 74.86 4 No. of shares issued having paid-up value of Re.1 per share 1) Hitesh Engineers Pvt. Ltd. 2) Shruti Engineers Pvt. Ltd. 304 411 5 Total Consideration (4) * (3) 1) Hitesh Engineers Pvt. Ltd. 2) Shruti Engineers Pvt. Ltd. 5532.80 7480.20 55.39*10 Shares = Rs. 553.90 74.86 * 10 Shares = Rs. 748.60 6 FMV per share (As per Assessing Officer) 10.65 55.39 74.86 7 Total Consideration as per Assessing Officer (4) * (6) 1) Hitesh Engineers Pvt. Ltd. 3237.60 55.39 * 10 Shares = Rs. 74.86 * 10 Shares = Rs. Page | 11 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi 2) Shruti Engineers Pvt. Ltd. 4377.15 553.90 748.60 The ld Counsel stated that the Assessing Officer while finalizing the Assessment order of Transferee Company (Rajoo Engineers Ltd.) has wrongly compared the share having paid-up value Rs. 1 per share with the paid-up value of Rs. 10 per share of Transferor Companies (Hitesh Engineers Pvt. Ltd. and Shruti Engineers Pvt. Ltd.) and accordingly, wrongly worked out excess number of shares. We find that as provisions of section 47(vii) of the I.T. Act, 1961- the above such transactions not regarded as transfer, the provisions of section 47(vii) of the I.T. Act, 1961 is reproduced below: “any transfer by shareholder, in the scheme of amalgamation, of a capital asset being share or shares held by him in the amalgamating company if- (a) the transfer is made in consideration of the allotment to him of any share or shares in the (amalgamated company except where the shareholder itself is the amalgamated company, and) (b) the amalgamated company is an Indian company Therefore, we find that the transaction of allotment of shares by amalgamated company (Rajoo Engineers Limited, being an Indian Company) to the shareholders of Amalgamating Companies (Hitesh Engineers Pvt. Ltd. and Shruti Engineers Pvt. Ltd) is not a transfer within the meaning of Section 47(vii) of the Act and therefore, provisions of Section 45 of the Act shall not apply for computing capital gain. 14. As regards applicability of provisions of Section 56(2) (vii)(c) (ii) of the Income-tax Act. 1961, first of all, we shall examine the provisions of the said section, (to the extent applicable to our analysis), which is reproduced below: “Where an individual or a Hindu Undivided Family receives, in any previous year, from any person or persons on or after the 1\" day of October, 2009: Page | 12 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi Clause-C-Any property, other than immovable property, (i) Without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property. (ii) For consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration” We find that the shareholders of Hitesh Engineers Pvt. Ltd. and Shruti Engineers Pvt. Ltd. have not received consideration, (as per the scheme approved by the hon`ble High Court,) which is less than aggregate fair market value of their shares and therefore, provisions of Sec. 56(2)(vii)(c) are not attracted.Similarly for rationalization of section 56 the Income Tax Act, 1961 and with a view to bring uniformity in tax treatment, the Finance Act, 2016, proposed to amend the Act, so as to provide that any shares received by Individual or HUF, as a consequence of demerger or amalgamation of a company, shall not attract the provisions of clause (vii) of sub -section (2) of section 56. This amendment is made effective from 1st April, 2017 and shall accordingly apply in relation to A.Y.2017-18 and subsequent years. Accordingly clause (h) is introduced after clause (g), under second proviso under sub- clause(c) of clause (vii), under sub- section (2) of section 56 of the I.T.Act, 1961, which is reproduced below: “(h) by way of transaction not regarded as transfer under clause (vicb) or clause (vid) or clause (vii) of section 47.” As the object of the above stated amendment is to rationalize the provisions of section 56 of the Income Tax Act, 1961, with a view to bring uniformity in tax treatment, the said amendment is clarificatory in nature and hence, equally applicable to the transactions in financial year 2013-14, relevant to A.Y.2014-15. The copy of Circular No. 3/2017, dated 20/01/2017, F.No.370142/20/2016-TPL issued by CBDT for Page | 13 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi explanatory notes to the Finance Act, 2016 is submitted by the assessee, before the Bench. 15. Therefore, the transactions of allotment of shares of amalgamated company to the shareholders of amalgamating companies, at a consideration higher than the consideration worked out by the assessing officer of M/s Rajoo Engineers Ltd is outside the purview of Section 45 of the Act, for computing capital gain, in view of the provisions of Section 47(vii) of the Act. And the provisions of Section 56(2)(vii)(c)(ii) are applicable, if an individual or an HUF transfer any property, other than immovable property without consideration, the aggregate fair market value of which exceeds fifty thousand rupees or for a consideration which is less than aggregate fair market value of the property. However, the consideration in the form of shares received by shareholders of amalgamating companies from amalgamated company is higher than aggregate fair market value of the share as worked out by the assessing officer of M/s Rajoo Engineers Ltd. and therefore, provisions of Section 56(2)(vii)(c) (ii) of the Act, is not applicable, to the assessee under consideration. We also find that provisions of Section 56(2)(vii)(c) (ii) of the Act, do not override the provisions of Section 47(vii) of the Act. In order to compute capital gain, there should be “transfer”, since, the said transaction, under consideration is not a “transfer”, therefore, capital gain does not attract.The Finance Act, 2016, also for rationalization of tax treatment introduced clause \"h\" under 2nd Proviso under sub-clause (c) of clause (vii) under sub-section 2 of section 56 of the Income Tax Act, to exclude the transactions covered under clause(vii) of section 47 of the Act, and being an object to rationalize provisions of section 56 of the Act, with a view to bring uniformity in tax treatments, the said amendment is Page | 14 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi clarificatory in nature and hence, have retrospective effect and therefore, applicable for A.Y. 2014-15, also. 16.Conclusion We note that provision of Section 56(2)(vii)(c)(ii) of the Act, does not get attracted in the case of shares received on amalgamation. Under the amalgamation, a shareholder of amalgamating company in effect receives the same value of shares of the amalgamated company as he/she original held in the erstwhile company. In case of shares received upon amalgamation, there are no two parties to a transfer of a property. One receives shares in lieu of shares already held. New shares allotment by amalgamated company does not give rise to a \"transfer\" of shares and hence also, section 56(2)(vii)(c)(ii) has no application. Transfer of shares in a scheme of amalgamation is not considered as a transfer, under sec. 47(vii). If it is not transfer, then the application of Section 56(2)(vii)(c)(ii) is not applicable. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 17. In the result, the appeal of the Revenue is dismissed. Order is pronounced in the open court on 18/10/2024 Sd/- Sd/- (DINESH MOHANSINHA) (Dr. A.L. SAINI) \u0001याियकस द\tय/ Judicial Member लेखा सद\tय/ Accountant Member राजकोट /Rajkot (दनांक/ Date: 18/10/2024 DKP Outsourcing Sr.P.S Page | 15 ITA No.302/RJT/2024 – A.Y. – 2014-15 ACIT vs. Kruti Rajesh Doshi आदेश क\u000f \u0010ितिलिप अ\u0014ेिषत/ Copy of the order forwarded to : • अपीलाथ\u0018/ The Appellant • \u0010\u0019यथ\u0018/ The Respondent • आयकरआयु\u001c/ CIT • आयकरआयु\u001c(अपील)/ The CIT(A) • िवभागीय\u0010ितिनिध, आयकरअपीलीयआिधकरण, राजकोट/ DR, ITAT, RAJKOT • गाड'फाईल/ Guard File By order/आदेश से, सहायक पंजीकार आयकर अपील#य अ+धकरण, राजकोट "